Appeals Court: Medicare Secondary Payer Act Doesn't Preempt State Law

Medicare does not pre-empt state workers compensation laws that establish rules dealing with the handling of medical claims, the 5th U.S. Circuit Court of Appeals has ruled.

The case dealt with whether claimants in a workers compensation case could bypass Texas workers compensation provisions mandating preauthorization of medical by filing a claim first with Medicare.

The case deals with the Medicare Secondary Payer Act, a law first enacted in 1980 and amended several times since then.

It forces claimants in insurance cases of all kinds that use Medicare to pay the initial claims but are also later reimbursed by insurers, to repay Medicare what the federal plan paid out.

“With this holding, the 5th Circuit prevents workers’ compensation claimants who are also Medicare beneficiaries from recovering double damages from workers’ compensation carriers  when Medicare pays for medical services that were never submitted pursuant to workers’ compensation statutes and rules,” according to Dana M. Gannon, a partner at Smith & Carr, P.C., in Houston.

She argued the case on behalf of the Insurance Company of the State of the Pennsylvania, an AIG company.

Gannon said the case is important because the court held that the Medicare Secondary Payer Act does not preempt state workers’ compensation law requirements.

“Rather, there is a “harmonious relationship” between the MSP and state workers’ compensation law, Gannon said.

“The 5th Circuit further held that Medicare’s determination that medical services are reasonable and necessary does not curtail the state workers’ compensation process,” Gannon said.

The case is Guadalupe Caldera v. the Insurance Company of the State of Pennsylvania, 2-11-C.V.-321.

In this case, Caldera’s doctor bypassed Texas rigid rules on preauthorization of medical claims to get the go-ahead to do surgery on Caldera’s back.

The fee was $66,000.

Caldera then sued, seeking double compensation from the insurance company so he could pay off Medicare and also provide a fee to his lawyer in the case.

His lawyer argued that once Medicare pays for a medical service, “the workers’ compensation claimant is absolved of any responsibility to adhere to any state workers’ compensation requirements.”

In a brief to the court, Gannon argued that, “In this case Caldera is asking this court to … find that the reimbursement extends beyond what he was entitled to recover as a workers’ compensation claimant ‘by the operation of state law’.”

Gannon argued on behalf of the insurance company that “This assertion is contrary to the language in the MSP, the regulations concerning the MSP, and congressional intent.”

The court said that under the MSP, neither state law nor a private insurance contract, for example, reduce an insured’s payments by the amount of his eligibility for Medicare.

“The MSP and its implementing regulations do not, however, extend so far as to eviscerate all state-laws limitations on payment, as Caldera suggests,” the court said in its opinion.

“To the contrary, the plain language of the MSP illustrates its harmoniums relationship with state workers compensation law: a workers compensation carrier is ‘primary’ only if ‘payment has been made or can reasonably be expected to be made under a workers compensation law or plan of the U.S. or a state,” the court said in citing the MSP law.

“Indeed, numerous MSP regulations presuppose the application of state workers’ compensation laws,” the decision said.

An expert in MSP compliance, an esoteric area, who asked not to be quoted by name or affiliation, said the case is important because “it is quite firm in stating that the MSP does not necessarily expand coverage under other compensation programs.”

This person said the decision, which the source said is also “well-written and does not bog down the reader in jargon,” states clearly that the MSP doesn’t exempt injured people seeking compensation from following procedures established by laws, rules, contracts or policies established under various compensation programs.

Moreover, this source points out, as the opinion states, that interpretation of MSP has only been courts in New York, Tennessee and Michigan.

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